PG&E Corp 8-K Summary: 2011 General Rate Case
Business Context and Reporting Period
This Form 8-K, dated February 22, 2011, reports on the issuance of a Proposed Decision (PD) and an Alternate Proposed Decision (APD) by the California Public Utilities Commission (CPUC) regarding Pacific Gas and Electric Company's (PG&E) 2011 General Rate Case (GRC). The GRC determines revenue requirements for PG&E's electric and natural gas distribution and electric generation operations for the period 2011 through 2013.
Key Financial Metrics
The filing details projected revenue requirement increases rather than historical financial performance. Key figures include:
- Settlement Revenue Increase: $395 million for 2011.
- Projected 2011 Revenues (if PD or APD adopted): Approximately $3.2 billion (electric distribution), $1.1 billion (natural gas distribution), and $1.7 billion (electric generation).
- Unrecovered Investment: $341 million in conventional electric meters replaced by SmartMeter devices.
- Rate of Return Adjustments: PD proposes 5.73% after-tax return; APD proposes 7.42% after-tax return on unamortized meter balances.
- Amortization Period: Both decisions propose a six-year period (2011-2016) for recovering unrecovered meter investments.
Material Changes and Comparisons
The PD and APD resolve the final issue not covered by the October 2010 settlement agreement: the recovery of financing costs for unrecovered conventional meter investments.
- Original Request: PG&E requested $44 million in additional 2011 revenues for meter financing costs, which would have resulted in a total increase of $439 million.
- Proposed Decision (PD): Authorizes $53 million for meter costs, resulting in a total 2011 revenue increase of $448 million.
- Alternate Proposed Decision (APD): Authorizes $59 million for meter costs, resulting in a total 2011 revenue increase of $454 million.
- Future Attrition: Both decisions authorize additional revenue increases of $180 million in 2012 and $185 million in 2013.
Outlook, Risks, and Contingencies
PG&E and the Utility cannot predict whether the CPUC will approve the PD, the APD, or an alternative decision. The CPUC may vote on the decisions no earlier than March 24, 2011, following comment periods ending March 14 and March 21, 2011.
Additional Provisions:
- Meter Reading Costs: Recovery of $113 million in 2011 meter reading costs is authorized via a new balancing account with a $76 million cap. PG&E retains cost savings from reduced meter reading due to SmartMeter installation.
- Reporting Requirements: New annual reports on budgeted vs. recorded spending and semi-annual reports on gas distribution pipeline safety are required.
Investor Verification Checklist
- Confirm the final CPUC vote outcome (PD, APD, or alternative) scheduled for March 24, 2011 or later.
- Verify the impact of the final decision on the 2011-2013 revenue requirements compared to the $448 million (PD) and $454 million (APD) projections.
- Monitor the implementation of the new balancing account for meter reading costs and the $76 million cap.
- Review future filings for compliance with the new annual and semi-annual reporting requirements regarding spending and pipeline safety.